New York City’s finances have stabilized amid declining costs for asylum seekers and strong revenue, largely from growth in business and property tax collections. But potential policy changes on the federal level creates uncertainty for the coming years which require fiscal preparation, according to a report on the city’s November financial plan modification released today by State Comptroller Thomas P. DiNapoli.
“A return to greater budget stability is good news for New Yorkers and should provide the city with an opportunity to focus on managing demand for city programs and boosting industry sectors that are still recovering from the pandemic,” DiNapoli said. “However, with the potential for policy changes at the federal and state levels, preparation and transparency remain paramount to navigating future uncertainty. Outlining plans to leverage resources and bolstering reserve levels would be fiscally prudent for the city.”
State and federal policy shifts have led to a steady reduction in the number of asylum seekers entering and remaining in the city’s care in the current fiscal year. This decline is expected to continue in the current year and may accelerate if federal immigration policy becomes more stringent.
In November, the city also introduced the fiscal year (FY) 2025 Savings Program, consisting entirely of savings from asylum seeker services, debt service, and efficiencies at city agencies. The new program is expected to generate savings of $785 million in FY 2025, and less than $100 million total during FY 2026 and 2027.
The Savings Program reduced the city-funded portion of spending for asylum seekers by $436 million in FY 2025 and by $59 million in FY 2026. However, based on recent trends, the city could save another $1.2 billion in the current fiscal year. DiNapoli’s office projects that if this population decline were to continue, savings for the city could be $2.4 billion in FY 2026 and $2.15 million in FY 2027.
Other gap-closing adjustments included downward revisions to the city’s planned pension contributions and funding for the City University of New York. These actions allowed the city to add more than $1 billion in expenses in FY 2025, largely for social services, and to restore the last police academy class that had been cut through prior year Programs to Eliminate the Gap.
As a result, the city’s stated budget gaps are largely unchanged since June, averaging $5.8 billion from FY 2026 through FY 2028. Adjusted budget gaps projected by DiNapoli’s office for FY 2026 through FY 2028, which anticipate higher costs for items like social services, education and the Metropolitan Transportation Authority, now stand at an average of $6.4 billion, down from the $10.4 billion forecast in August. The State Comptroller’s projected gaps are smaller than originally forecasted with revenue expected to be stronger and costs for asylum seekers expected to decline.
Federal fiscal and economic policies may undergo changes that could directly and indirectly impact the city’s finances. Most notably, federal funding to the city, which is expected to exceed $9.5 billion this year, is overwhelmingly for social, health and educational services, which could be impacted by new federal policy choices. Federal funds for New York state may also be affected, which could create fiscal pressure that could be pushed down to localities.
National economic policy changes may also include new and expanded tariffs, with local impacts on prices and certain industries.
This lack of certainty highlights the need for the city to add to its budgetary cushion. Overall, the amount of money in the city’s Rainy-Day Fund is virtually unchanged over the last two years, as unanticipated spending has required better than expected revenues to be used to fund new costs. Funds in the Rainy-Day Fund now equal 1.6% of total planned spending in FY 2025 (adjusted for surplus transfers), down from 1.8% in FY 2023.
Overall attrition in the city’s workforce has declined to near pre-pandemic levels and the city has made significant progress to accelerate recruitment efforts, but some agency divisions continue to experience elevated turnover and relatively high vacancy rates.
The city’s full-time workforce increased for the first time year-over-year since the COVID-19 pandemic, to 283,971 employees as of June 2024. Since then, staffing levels have increased to 285,871. The city assumes staffing will increase from current levels by 5% to 300,299 employees by June 30, 2025, which would be nearly the same as the year-end, pre-pandemic peak recorded on June 2020.
New York City’s economic growth relies on its ability to provide the public with quality services, while also adapting to fiscal challenges. Adding to its Rainy-Day Fund this year, during a period of fiscal strength, would give the city budgetary flexibility for its economic and policy objectives and demonstrate that it is preparing for an uncertain future.
Report
Review of the Financial Plan of the City of New York
Fiscal Tracking Tools and Reports
New York City Agency Services Update
Review of the Financial Plan of the City of New York (August 2024)
Update on New York City Staffing Trends (May 2024)